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Where Taxpayers and Advisers Meet

Gifting money/shares to grandchildren

samuelp
Posts: 7
Joined: Fri Nov 27, 2015 1:40 pm

Gifting money/shares to grandchildren

Postby samuelp » Fri Nov 27, 2015 1:56 pm

Hi.
  • My parents wants to gift my children and my brothers children (all minors) either cash or shares in a new company which I have incorporated.
  • If money will be gifted it will be from the ISA's my parents hold.
  • If shares are gifted, my parents will first invest in my new business through the sale of their ISA's and then their shares will be gifted to the grandchildren.
  • I will also be investing a percentage in my business as will a business partner(not related in any way)
  • I understand the gift will be PET - after 7 years it will no longer form part of my parents estate.
  • What I want to understand is whether future dividends paid to the children will be treated as their own income (and not mine or my parents) and therefore whether the children ill be able to use their tax allowance.
  • I would also like to understand whether gifting the money or the shares is the best option.
  • I would also like to understand whether there are any other tax implications or non-tax for that matter.
Thanks in advance for your time.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: Gifting money/shares to grandchildren

Postby section 44 » Fri Nov 27, 2015 3:01 pm

... so if they give your children shares your parents would subscribe for shares in your company with both you and your parents, at the time of subscription, knowing that the shares would be given to your children ...

samuelp
Posts: 7
Joined: Fri Nov 27, 2015 1:40 pm

Re: Gifting money/shares to grandchildren

Postby samuelp » Fri Nov 27, 2015 10:40 pm

... so if they give your children shares your parents would subscribe for shares in your company with both you and your parents, at the time of subscription, knowing that the shares would be given to your children ...
Yes, they would subscribe knowing that some of their shares would be gifted to their grandchildren though not immediately if that's important. Possibly after 12 months or so.

To me it appears to be a genuine gift without them receiving any income in return though I need a more experienced and/or professional opionion.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: Gifting money/shares to grandchildren

Postby section 44 » Mon Nov 30, 2015 12:12 pm

a genuine gift
by whom, you or your parents (hence would the amount subscribed by your parents be at market value, taking into account any additional value that you would subsequently generate for the company)?

samuelp
Posts: 7
Joined: Fri Nov 27, 2015 1:40 pm

Re: Gifting money/shares to grandchildren

Postby samuelp » Mon Nov 30, 2015 12:39 pm

a genuine gift
by whom, you or your parents (hence would the amount subscribed by your parents be at market value, taking into account any additional value that you would subsequently generate for the company)?
the gift will be made by my parents by selling up shares in their share ISA's. The amount invested in the newly incorporated company will be the based on startup costs and be the same for all investors (including myself and other outside investors) in percentage terms e.g. Assuming a total startup costs of £500k, every 10% shareholding would be £50k for ALL initial shareholders.

Any subsequent value generated buy the company obliviously would not be present at startup and would/could take many months/years.

section 44
Posts: 4468
Joined: Thu Oct 30, 2008 12:47 pm

Re: Gifting money/shares to grandchildren

Postby section 44 » Mon Nov 30, 2015 12:55 pm

so why would they give the children shares rather than cash?

surely more secure and lower risk

LozaACCS
Posts: 1504
Joined: Wed Aug 06, 2008 3:55 pm

Re: Gifting money/shares to grandchildren

Postby LozaACCS » Tue Dec 01, 2015 9:49 pm

Can I presume the objective is to avoid the parental settlement rules at S629 ITTOIA 2005, if so the cash gifts would achieve that objective, the shares route would possibly fly close to anti avoidance rules for IHT,CGT and IT, I would advise your parents to keep it simple, gift the cash.


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